Mike I think I remember u saying u where thinking about trading the channels the opposite. Did u ever do it. Its a interesting idea.

If u didn't do it I think I'm gonna fund a small account and see what the results r.I realize in the long run trading the correct way will out preform. But trading the right way means no interference. Ive been trading for a long time and various instruments and I still have a hard time not interfering(haven't traded doch for a long time just trading in general)I wonder how many can with out interference. A ACID seems to be the only 1 I know and I think even billbob said he had issues with that. (I don't want to speak for them ) just from what I remember .Plz correct me if I'm wrong

Dam that's longer than I expected.

Yes, i started trading that way and it worked quite well...but have to say that it was only about 2 weeks then i focused on something different, but i might go back to it...

You can google for Turtles Soup system...i used a DC 5 on 1h and 3h charts...TP the opposite channel and SL 3x ATR...

So, you are basically trading false breakouts...price gets to the channel and retraces, so you put buy orders at the lower DC and sell orders at the upper DC...

I looked at trading the opposite signals of a Donchian Channel system (short at breaks of the upper bound and long at breaks of the lower bound). There is a mountain of problems with that. Where do you set your stop? To truly trade the opposite system you cannot trade with a stop, only a profit target of the opposite side of the channel. Trading a system with no stops and profit targets that get smaller and smaller doesn't sound like a very antifragile system.

So anyone looking to do this will set stops. Suppose you decide to set it a distance equal to that of the price range in the channel, your best case scenario then is to get a 1R trade! Most of your wins will be less than 1R and ALL of your losses will be 1R (plus slippage). You need a really high win rate to overcome this problem. Before you say: "I will have a 70% win rate because I am trading the opposite of a system with a 30% win rate!" remember that you actually can't trade the true opposite of the system without moving your initial stop distance to infinity! So by adding stops, your win rate will not be that high and by running without stops your losses will be much much bigger. To truly get the opposite of the system you will be cutting winners short and letting losses run!

If you believe the Donchian system actually profits, you must also believe the opposite system actually loses.

Suppose I pitched you a system saying: "This system will make all your losses the same size exactly every time and keep your wins smaller than those losses." Are you in? That is what the opposite system with an added stop loss will do.

I think when you see a channel system go through a period of back-to-back losses it is easy to say: "If I had taken the opposite of those trades I would have made back-to-back profits". That gives the impetus to look at an anti-Donchian system. But once you look at the anti-Donchian system and realize it either cuts profits short and lets losses run or cuts losses short and cuts profits even shorter you ask: "What is the solution to all this whipsaw in my Donchian system?"

When I first heard that, I thought for years that Seykota was saying "If you can't stomach whipsaws trading is just not for you." But I don't take that from it anymore. I think what it means is: "Don't pick a single system and run the risk of it whipsawing your account to dust. Rather, run systems of various time frames so that when one system is trading a string of losses the other system(s) are not trading in and out but holding a position either long, short, or flat."

When I first heard that, I thought for years that Seykota was saying "If you can't stomach whipsaws trading is just not for you."

My understanding of that quote is that whipsaws are unavoidable for trend followers. I do agree that with trend following in general and DC in particular, the smaller time frames are more vulnerable to whipsaws due to the smaller DC width. Case in point, 2 weeks ago when China cut rates unexpectedly, my system (4 hour time frame) took a beating with a few full losses. My opinion is that the larger time frames and/or longer DC periods can help reduce exposure to market knee-jerk events.

My understanding of that quote is that whipsaws are unavoidable for trend followers. I do agree that with trend following in general and DC in particular, the smaller time frames are more vulnerable to whipsaws due to the smaller DC width. Case in point, 2 weeks ago when China cut rates unexpectedly, my system (4 hour time frame) took a beating with a few full losses. My opinion is that the larger time frames and/or longer DC periods can help reduce exposure to market knee-jerk events.

That is certainly true. But also there can be times wherein a long channel (say a twenty week channel) can suffer back to back whipsaws while a ten day channel grabs healthy profits on a big move one direction over 8 weeks and another big move in the opposite direction over the following 8 weeks. If you go super long, say a 150 week channel, you can find that over many years that channel does nothing but back to back whipsaws as prices move from one bound of the channel to the other many times without any opposing bound ever crossing an entry taken by the system.

The time frames trading really comes down to , how much of a S/L risk your willing to take. As we all know the larger the time frame the more $$$ your going to need to make something of it.

kingalpha:

My understanding of that quote is that whipsaws are unavoidable for trend followers. I do agree that with trend following in general and DC in particular, the smaller time frames are more vulnerable to whipsaws due to the smaller DC width. Case in point, 2 weeks ago when China cut rates unexpectedly, my system (4 hour time frame) took a beating with a few full losses. My opinion is that the larger time frames and/or longer DC periods can help reduce exposure to market knee-jerk events.

i am back at my multi DC trading...DC 20 on 3 different timeframes (3h, 8h and daily)...let's see how it works next week...

been some time since hearing/reading from bob...

i had a look at his FXbook and seems he had a rough NFP

Ah Mike, do I have stories to tell. Valuable lessons that are good for all to hear and learn from. Things I should know better and thought I would be immune to now. To cut a long story short,

the markets made an

out of me.

So after riding the wave of success during the development stage and a more than satisfying week on the first week of live trading my ego got in the way. I've been reading the EU well on the ticks, my bot on the 4hr is just ticking over doing its thing and after a long long struggle things look good. Started to strut my stuff like a Rhode Island Red. I flaunted my recent success in the markets face for I knew better. I'll break a rule here, bend it there. Well, as you saw, history tells the end story.

I mismanaged my trade sizes, revenged traded, I had basically thrown my trading plan out the window. And I should of paid a larger price. So very humble in defeat, and hopefully the lessons I learnt this week will last a lifetime.

Fridays NFP was a classic example. I posted my analysis on another thread and will stand by that work. It met my criteria to trade so I took them. Now trading news is risky at the best of times. But its about managing that risk. Now when the markets react and whip like that your stops are gonna get taken out regardless of how far they are. So why have large ones, that singularly reduces your R:R ratio. The other thing is that the markets either do or don't move in your favor. No need to analysis why, it simply does. Move in your favor and you make pips, a lot of pips. Move against you and again it doesn't matter where your stops are they will be taken out. So utilizing this very fact alone having a 20 pip stop means you can expect 5+ times return so maintaining any form of a winning % does yield positive returns. The secret is make the decision, place the trade, accept the result. Move on.

I didn't accept the result and didn't move on. I got angry at the market, kicked the cat, yelled at the cook and immediately placed a revenge trade, or two or three or shizt I forget. Man it was horrible lol. Might as well of been given my money to our m8 Hoggy.

But I have survived and will start afresh this week. Gonna let the bot do it's thing, manage the trades around it and stick to my trading plan for ticks. But I have also gone to a developer to get a couple of custom indicators made. The lessons from trade and money management involved in DC trading I believe can be applied down on the tick charts. The only adjustment is trends will only last hours, not days or weeks or months as on the higher time frame.

There is simply no way of detecting when these micro-trends will start or finish. No indicator, no pattern or formation, no high or low. But trading on the ticks we have another friend, spread. To most spread is a cost to trading. But the process of how the spread is made in the first place provides information about liquidity. And information about liquidity can provide information of market direction in the very short term.

So my work continues, this week I'll be a smarter trader. And I'll work harder in the background on developing my new system.

Bob, i also did that things...overtrade, revenge trade, etc...and when i thought i learned the lesson, i did it again...and again...until one day i didn't care about the losses anymore...i accepted them as part of trading, and now i am trading much more relaxed, rational...but i still tweak systems too early after a bad run (still have to learn some things :))...but i don't revenge trade anymore

as soon as i have time, i will have a look at your tick chart thread...sounds interesting...

Guys, please set my mind at ease and tell me it is quite normal to have a floating -1.6k pips, and that it may change with time. I keep ARBONLSD's myfxbook as my reminder that there will be a time that I too will be able to lock in +20k pips.

Guys, please set my mind at ease and tell me it is quite normal to have a floating -1.6k pips, and that it may change with time. I keep ARBONLSD's myfxbook as my reminder that there will be a time that I too will be able to lock in +20k pips.

A week ago I had >400 pips (great start), now I am 1600 in the red..

Forget about pips and think in terms of percentages. Position sizing is the most overlooked part of trading.

Two Donchian Channel traders buy EUR/USD at 1.1500 and place stops at 1.0000. They both have 1500 pips in risk from entry to stop. Trader Joe put on one micro (1,000) so his dollar risk is $150. His account size is $1500 so he is risking 10% of his account on the trade.

Trader Jane has an account size of $1500 also but she just wanted to risk 1% so she just put on 100 units. Two weeks later EUR/USD is at 1.0500 and both traders are down 1000 pips in the trade but Trader Joe is down $100 which is 6.67% of his account while Trader Jane is down just $10 which is 0.67% of her account.

In addition to that, Trader Jane put on 9 other trades in different markets that each risked 1% so her total open risk was the same size as Trader Joe's but her likelihood of being in at least on winning trade was 10 times more than Trader Joe's.

Trader Jane is a systematic diversified trend following trader. Trader Joe is uses Donchian Channels like Trader Jane but does not diversify his risk in different markets and does not concern himself with risk parity (position sizing). That is the difference.